Although buyers for Austin businesses are not in short supply, matching a buyer with an existing business isn’t always as simple as it might sound. That’s why area Austin business brokers and mergers and acquisitions experts suggest anyone contemplating selling a business work with an area professional for the best results. In the last few years, selling businesses in Austin TX has become much more complex due to the number of companies and individual buyers moving from out-of-state to the Austin area.
Industry experts report Austin area and Central Texas are expected to experience significant growth over the next five to ten years. That prediction suggests business owners considering marketing their organization should explore their options soon to determine when to sell.
Getting Started: Evaluate the Value of a Business
Anyone asking how to sell a business in the Austin area wonders how the process actually starts. The first step is to determine the value of the business. Properly evaluating any business requires a certain level of expertise as there are many factors involved in the determination of value.
When selling a business, gross revenue figures, profit margins, equipment, and inventory all have values. Intangibles like reputation and goodwill also play roles in the business valuation, but are a little more difficult to put an exact figure on. Here at CGK Business Sales, we have a particular expertise in business valuations. We have been trained at some of the highest levels and passed some of the most difficult tests in the industry. We will give you a realistic value range for your business. We are not here to give you an absurdly high price and wait for the buyers to beat that price down. We don’t think that’s fair. Often, we hear of other business brokers in Austin who do this. Then, the business does not sell and just sits on the market. Meanwhile, these less-trained business brokers have burned some of the best, most-interested buyers. We give you an idea of how the buyer may look at your business, how the bank may value it, and how the third-party valuation companies (in SBA deals) would look at your business. All three of these types of stakeholders have different motivations and will look at your business in different ways. For larger businesses, this process gets even more complex.
Putting the Best Foot Forward: Developing a Confidential Information Memorandum (CIM)
Marketing is somewhat of an art, and Austin business brokers and mergers and acquisitions professionals understand how important it is to present a business in the best light possible. The Confidential Information Memorandum (CIM) must contain all the information prospective buyers need to determine if an acquisition is viable.
Business brokers must become marketing experts, who work closely with the business owner. These mergers and acquisition professionals must give out enough information at this stage to make a buyer interested, while protecting confidential information. Some information must, by its very nature, remain confidential during early marketing stages. At some point, later, during due diligence, all pertinent information must be disclosed to buyers. But, at this point, the Confidential Information Memorandum’s objective is to put the business in the best possible light and then determine which buyers are more likely to take that next step in the buying process. This is a delicate balance. The Confidential Information Memorandum must be thorough enough to cover all the basics and then some, while protecting the seller from competitors who might use that information for their advantage. Keep in mind, any buyer that wants to see the CIM must sign a non-disclosure agreement (NDA) ahead of time. We also find out background information on the buyer to determine who they are, what company they are with, and whether they are financially qualified to buy the business before they see the CIM or find out any information, at all, about the seller’s business.
Moving On: Matching Buyers with Sellers
Not every business buyer matches the needs of specific sellers, which means Austin business brokers and mergers and acquisition specialists must work diligently to match a seller with an ideal buyer for their business. In some cases, that may take a little time, as the pool of buyers is in constant fluctuation. However, when determining how to sell your business, business brokers become marketing professionals and have the experience and connections necessary to pair sellers with prospective purchasers.
Negotiating Skills: Experience Makes a Difference
Austin business owners frequently ask business brokers to “sell my business” because they realize the mergers and acquisitions professionals have the skill sets necessary to negotiate a transaction properly. When the objective is to net the highest profit possible from the sale of a business, owners rarely have all the experience necessary to negotiate prices and terms effectively. Remember, it’s not just the highest price that should always win. The terms are very, very important to a business sale. With sophisticated buyers, this is a common tactic; promise the highest price, but make the terms very stringent to get that highest purchase price. Also, as deal size grows, deal structure becomes more important. If the seller is to net the highest after-tax proceeds, careful planning is necessary, not just from your attorney or tax professional, but from the business broker, as well. When it comes to selling businesses in Austin TX, not all business brokers are created equal. We have negotiated with the most sophisticated types of buyers down to first-time buyers.
Getting to the Closing: Facing Those Inevitable Problems
Any business for sale will face problems between the signing of a letter of intent (LOI) to purchase and finalizing the transaction. There is a significant amount of due diligence that any buyer will want to do. Even if the buyer is inexperienced, they will usually hire service providers that are experienced in this process. Of course, if the buyer is a private equity professional or larger corporate buyer, they will have multiple types of diligence teams who will help with the due diligence process. It’s usually best if any problems are disclosed ahead of time. It’s a fact of life that issues no one anticipated will emerge. Your better business broker and mergers and acquisitions professionals deal with those challenges on every deal. They will make sure the transaction closes and everyone involved is satisfied with the results.
Taking the First Step: A Simple Phone Call Gets the Ball Rolling
If you’re considering selling a business anywhere in the Austin area, it pays to consult industry experts early in the process. Doing so virtually eliminates the problems many business owners confront when going forward with a sale. If you’ve got questions about how to sell a business, the answers are only a phone call or email away. Contact an Austin business broker for help, today. CGK Business Sales has the education, experience, and patience necessary to get your business sold. Call us today at 512-900-3770 and we’ll be happy to speak with you in greater detail about selling businesses in Austin TX.